Flat-brimmed hats from Hong Kong (a case study in relative value)

Imagine for a moment, a yet unknown, but potentially future world-renown artist in Hong Kong creates a truly original, one of kind custom flat-brimmed hat design.

He then makes a deal with a local top-quality manufacturer in China to make 100 hats, and he sells those hats to a distributor for some quick cash ostensibly to pay down his college loans.

The distributor then sells 50 hats to a online merchant, specializing in hats. The other 50 are sold to a trendy hipster clothing store in downtown LA.

The online merchant decides to sell the hats for $30.00 each. He makes a few sales, but not much. After 6 months, he decides to sell the remaining hats for $10.00 each just to get them out of his inventory.

Back in LA, the trendy luxury clothing store sells the hats for $200 each (because they’re appealing to an affluent market). Sometime later, a popular hip-hop artist visits the store on a weekend, stumbles on the hat, and buys.

Soon later he’s seen sporting the hat at a popular music festival, and the craze ignites. Suddenly, there’s a huge demand for the mysterious hats. The store in LA sells the remaining hats in their inventory in quick succession, all at an even higher markup. Soon the fashionistas of the day flock to the internet to find the remaining hats.

5 years later, after journalists discover the unknown hat artist and the internet makes him famous, the hats can still be found online for nearly $2,000 each.

Or, in an alternative scenario, the artist goes unknown, the hype dies down, and five long years later there is next to no desire for the once popular hats. You can easily find them for eBay, all for no more than a few dollars.

Now, how much are the hats really worth? And who has the most authority in making that estimation?

The original designer?

The manufacturer?

The distributor?

The online merchant?

The team at the hip store in LA?

The rapper?

The folks buying and selling the hats online?

Or you?

[It’s not authority that often determines value. It’s credibility, persuasiveness, and story.]